MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is optimistic the country’s economic gains this year could be duplicated in 2013 as it touted its achievements a day after the government reported its own.
“With six to seven-percent growth and 3.1 percent inflation, that is a performance that basically matches the performance of 2012. It is a continuation of strong combination of strong GDP growth and stable inflation,” BSP Governor Amando Tetangco Jr. told reporters Wednesday night.
The Aquino administration has set a six to seven-percent growth goal next year, while BSP forecasts inflation will hit 3.1 percent. The outlook is within the latter’s three to five-percent target in 2013.
The Philippines enjoyed what investors and analysts call a “sweet spot” this year, characterized by strong gross domestic product (GDP) growth of 6.5 percent as of the third quarter— beating official targets— and tamed inflation of 3.2 percent as of November.
Normally, a fast growth in GDP— the sum of all products created and services rendered in an economy— results in an upshot in the prices of goods and services, hurting consumers. In the case of the Philippines however, both have remained well managed in 2012.
All these were achieved despite challenging global economic times with Europe and US still trying to get out of their respective crises. Tetangco said he does not see any reason why the strong economic performance could not be maintained next year.
“We have an election year next year, and then there is PPP (public-private partnership). If the signs of recovery strengthen, then we will also have higher exports and therefore higher manufacturing activity,” the BSP chief explained.
“And then you have the anchor of driver of consumption. Given all of these, we expect sustained strong economic growth next year,” he added.
As for inflation, Tetangco is confident prices will remain tamed even as demand is expected to pick up further as a result of the senatorial elections. A strong peso, which gives more purchasing power to consumers, is expected to help achieve that.
“The experience in the past was there was some uptick in the inflation rate at around the time of the election. But not such is not significant and non-persistent,” Tetangco said.
“The exchange rate is projected by market players to be firm,” he added.
In a statement released Wednesday night, the central bank said it pursued its mandate of price and financial stability “carefully” this year as well as ensure banks remain healthy and able to lend to finance economic activity.
It cited the four rate cuts it implemented this year that brought borrowing and lending rates to record low of 3.5 percent and 5.5 percent, respectively. This “led to lower bank lending rates that helped encourage domestic investment and consumption,” it explained.
Banks have also been well-capitalized, BSP said, putting them at a comfortable situation once Basel III banking reforms take effect in January 2014. The reforms are concentrated on having more capital and better liquidity management to avoid a repeat of the 2008 global financial crisis.
“We are better prepared for Basel III than other jurisdictions in the West,” Tetangco said.